HOUSING INITIATIVES INCNon-Profit

2025-001 Financial Reporting – Material Adjustments Criteria: Internal controls over financial reporting should be designed and implemented to ensure that financial statements are free from material misstatement, whether due to error or fraud, and that such misstatements are prevented or detected and corrected on a timely basis. Condition: During the audit, material audit adjustments were proposed and accepted by management. The adjustments were necessary to correct material misstatements in the financial statements that had not been identified by the organization’s internal control processes. Significant adjustments included: • Recording loan forgiveness, which corrected the overstatement of liabilities and understatement of revenues • Reclassifying HOME program assistance from revenue to deferred loan liability, which corrected the overstatement of revenues and changes in net assets and the understatement of liabilities • Reclassifying development costs from expenses to property and equipment, which corrected the understatement of assets and overstatement of expenses. Cause: The Organization’s internal control processes did not identify or correct these misstatements prior to the audit. This suggests certain review and reconciliation procedures may not be operating effectively. Effect: Financial statements generated from the accounting system and provided to the board may contain error(s), which could potentially affect decision-making and oversight. Auditor’s Recommendation: We recommend that management review and enhance its financial reporting processes, including implementing more robust review procedures and reconciliations, to help ensure that misstatements are identified and corrected prior to the audit. Auditee’s Response: Management agrees with this finding and agrees with the recommendation. Management will evaluate current procedures and implement improvements to strengthen the accuracy and completeness of financial reporting. Contact Person: Brad Hinkfuss Anticipated Completion: December 31, 2026

2024-001

2024-002 Department of Housing and Urban Development, Assistance Listing Number 14.239 Home Investment Program: Income Verification Criteria: Organizations that operate rental housing developed with HOME funds are responsible for verifying and documenting tenant income to ensure that units are rented to eligible low-income households. Complete and accurate income documentation is essential to demonstrate compliance with program eligibility requirements and long-term affordability commitments. Condition: During our review of 34 tenant files for HOME-funded rental units, we noted the following: • 6 files did not contain any income verification documentation • 1 file include income documentation, but it was incomplete and missing required supporting documentation Cause: These issues primarily occurred during a transition in property management. The change in personnel and processes led to a lapse in documentation and inconsistent application of income verification procedures. Effect: Without proper income verification, there is a risk that units may be rented to households that do not meet eligibility requirements. Additionally, the absence of documentation may hinder the Organization’s ability to demonstrate compliance during monitoring or audit reviews. Questioned Costs: Not applicable. Auditor’s Recommendation: We recommend that management strengthen internal controls over the income verification process by: • Implementing a standardized checklist for required documentation • Providing staff training on income verification procedures • Conducting supervisory reviews of all files prior to tenant approval, especially during periods of staff transition Auditee’s Response: Management agrees with the finding and has taken steps to address the issue. Four of the seven identified files have been updated with complete income documentation for 2025, and the remaining three are in process. Contact Person: Brad Hinkfuss Anticipated Completion: 9.30.2025

Criteria: Proper financial closing and reconciliation procedures should be in place to identify and adjust the financial records to ensure the financial statements are fairly stated and presented in accordance with applicable standards. These procedures should be followed not only for yearend closing and reporting, but on a routine basis to ensure financial records are accurate through the reporting period. Condition: During audit procedures, the auditors proposed audit adjustments and account reclassification entries that, if not made, would have resulted in the financial statements being materially misstated. Specifically, adjustments were necessary to reconcile federal grant funds received but not accurately reflected in the financial records. Additionally, adjustments were necessary to reconcile the rental revenues between tenant payments and government subsidized rental payments. Cause: Certain adjustments for yearend accruals were not made by management. Additionally, certain reclassification adjustments were not identified that were necessary to present the financial statements accurately in accordance with applicable standards. Internal control processes and procedures do not currently include a review of actual rental payment transactions after the initial transaction is recorded. As a result, when actual rental payment funding sources differ from that of the initial transaction generated from the tenant management system, changes are not being identified or reflected in the financial records. Effect: Housing Initiatives, Inc.’s system of internal control may not prevent, detect, or correct misstatements in the financial statements. Questioned Costs: Not applicable   Auditor’s Recommendation: The auditor will continue to work with Housing Initiatives, Inc., providing information and training where needed, to make Housing Initiatives, Inc. personnel more knowledgeable about its responsibility for the financial statements. The auditor recommends that Housing Initiatives, Inc. review the various monthly and year-end processes and transactions necessary to close and reconcile the financial records. Auditee’s Response: Housing Initiatives, Inc. acknowledges its responsibility for the financial statements and proper presentation of such. Housing Initiatives, Inc. has continued to work with internal staff as well as consultants to continually update processes and procedures to ensure that financial activity is properly captured and recorded.

2022-001

2022-002 Department of Housing and Urban Development, Assistance Listing Number 14.239, Home Investment Partnership Program and 14.267 Continuum of Care Program: Control Deficiency Criteria: To meet the various aspects of program compliance, tenant files should have documentation that includes income verification, eligibility determination and current rental agreements. Condition: Tests of tenant files identified instances .where not all documentation was able to be located. Cause: Housing Initiatives, Inc. does not have a consistent process and recordkeeping system that ensures all tenant files are complete or that all applicable records are available timely. Effect: Without the necessary documentation to verify that tenants meet the various compliance requirements, there may be instances of noncompliance. Recommendation: We recommend that Housing Initiative develop processes and procedures to ensure that all tenant files are complete and include all necessary documentation to verify compliance. Response: Housing Initiative, Inc. is aware of the compliance requirements and the importance of complete tenant files. We have been working towards updating records and utilizing electronic records systems which may have resulted in not being able to find the documentation during testing. We feel tenant files and records should be complete in the future. Housing Initiatives, Inc.'s Corrective Action Plan: Regarding financial reporting finding, Housing Initiatives staff will continue to work with the same auditing firm to ensure that reporting for the current year is in line with GAAP requirements. In part, this will involve strengthening the agency's relationship with a third-party accounting firm. A recent merger involving the firm that Housing Initiatives used for the past several years provides an opportunity to involve a different firm. As regards the second finding, Housing Initiatives recognizes the importance and requirement of maintaining all required documentation for clients served. A review of all files will be implemented to reveal any incomplete documentation, and then steps taken to address any omissions.

2021-001 Department of Housing and Urban Development, Assistance Listing Number 14.239, Home Investment Partnership Program, Special Tests and Provisions: Housing Quality Standards Criteria: During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME assisted rental housing, the participating jurisdiction must perform on-site_ inspections to determine compliance with property standards. Condition: Housing Initiatives, Inc. does not have a consistent process and record system to verify that required inspections have been performed to meet the housing quality standards required of the program. Cause: Because some inspection processes are done by the participating jurisdiction, Housing Initiatives, Inc. does not always receive or document the inspection in tenant records. Reliance on the participating jurisdiction does not reduce the requirement as a subrecipient of these funds. Effect: Without an internal tracking system or inspection documentation, it is unclear if each property/ unit subject to the required Housing Quality Standards is in compliance with the required inspections. Recommendation: We recommend that Housing Initiative develop a database and tracking system for the purpose of documenting the required inspection processes of required properties. Response: Management is aware of these inspection requirements and is working on implementing a process to document and track. Contact Person: Brad Hinkfuss Anticipated Completion Date: August 31, 2022

2020-002 Lack of Federal Procedures Manual (Repeat Finding) Criteria: Organizations who receive federal grants or have grant programs should have documented policies and procedures in place over grants and grant expenditures. Condition: Internal controls over federal grants should be in place to provide reasonable assurance that misstatement in the schedule of expenditures of federal awards would be prevented or detected. Cause: Housing Initiative, Inc. does not have documented policies and procedures in place over grants and grant expenditures. Effect: Without documented policies and procedures, the internal control over federal grants is low, and the risk of misstatement in the schedules of expenditures of federal awards is high. Recommendation: We recommend that Housing Initiatives, Inc. works on written policies and procedures over grants and grant expenditures. At a minimum, procedures should address verification of allowable costs as well as cash management. Response: Housing Initiative, Inc. will work on developing written documentation to address federal programs. Housing Initiatives, Inc.'s Corrective Action Plan: As part of the response to a monitoring visit from the HUD Milwaukee Field Office, Housing Initiative has drafted and submitted procedures that delineate how federal grant funds are received, allocated, expended and recorded. These procedures have been submitted to HUD. Housing Initiatives anticipates HUD approval, and will make further policy modification if HUD officials so request.

2019-003

Single Audit Clearing House, CORRECTIVE ACTION PLAN SEPTEMBER 30, 2020 Housing Initiatives, Inc. respectfully submits the following corrective action plan for the year ended December 31, 2019. Name and address of independent public accounting firm: Johnson Block & Company, Inc. 9701 Brader Way, Suite 202, Middleton, WI 53562 Audit Period: January 1, 2019 - December 31 , 2019 The auditor's findings and our responses from the December 31, 2019 schedule of findings and questions costs are discussed below. 2019-003 Federal Procedures Manual Criteria: Organizations who receive federal grants or have grant programs should have documented policies and procedures in place over grants and grant expenditures. Condition: Internal controls over federal grants should be in place to provide reasonable assurance that misstatement in the schedule of expenditures of federal awards would be prevented or detected. Cause: Housing Initiative, Inc. does not have documented policies and procedures in place over grants and grant expenditures. Effect: Without documented policies and procedures, the internal control over federal grants is low, and the risk of misstatement in the schedules of expenditures of federal awards is high. Recommendation: We recommend that Housing Initiatives, Inc. works on written policies and procedures over grants and grant expenditures. At a minimum, procedures should address verification of allowable costs as well as cash management. Response: Housing Initiative, Inc. will work on developing written documentation to address federal programs. Housing Initiatives, Inc.'s Corrective Action Plan: The Finance and Office Operations Manager. the Property Manager, the Executive Director a nd an associate from the Grobe & Associates accounting firm will devise a written procedures manual to document internal processes in this regard. However, the re is a rigorous policy already in place that addresses this concern in part. All HUD grants have a structured system that dictates how funds are drawn down. ln this case, the Rent Assistance Grant involves funds that Dane County receives directly, and then distributes to HI1 as a subrecipient. HII cannot access funds independently. Rather, the Finance and Office Operations Manager must prepare a detailed monthly Rent Report request form. The Executive Director and an associate from the Grobe accounting firm review this Rent Report prior to sending it to Dane County for their review. Only upon Dane County's receipt and approval of the request are funds released to HU accounts. This process incorporates additional review from an accountant in the Dane County Department of Human Services. The process surrounding this grant and others will be formally documented moving forward and kept in a procedures manual. Contact Person: Bradley Hinkfuss Anticipated Completion Date: 12/31/2020

2018-003

GSA_MIGRATION

GSA_MIGRATION